Short-term rentals, also known as vacation rentals or Airbnbs, have made quite a buzz in the news lately. All eyes have been on New York City, since they recently enforced tight regulations where all short-term rental hosts must go through a stringent application process with the city. If approved, hosts can have a maximum of two guests, must be present at the property AND cannot lock any property doors, among other rules. Another recent example is Boise, Idaho is looking to enforce stricter compliance with existing short-term rental regulations. In our hometown of Atlanta, short-term rentals have been a hot topic among city council since March 2021. And the list of cities goes on.
So why is this happening and how does it impact real estate investors?
Why are Cities Enforcing Airbnb Regulations?
Various citings for enforcing vacation rental regulations include decreasing noise levels and security threats, assisting affordable housing efforts, and preserving the character of a town. In a recent article, The Guardian shared some of the viewpoints of supporters of the regulations in New York. Murray Cox of Inside Airbnb, a housing advocacy group said, “In New York City, residential apartments should be for residential use.” Christian Klossner, executive director of the New York’s office of special enforcement, released a statement defending the regulations. “Registration creates a clear path for hosts who follow the city’s long standing laws and protects travelers from illegal and unsafe accommodations, while ending the proliferation of illegal short-term rentals,” he said.
Opponents of regulations say that cities are discouraging tourists, and hotels are too expensive for many families.
Implications of Short-Term Rental Regulations on Investors
The implications for short-term rental investors, as always in real estate, are hyper local and depend on your market. Some markets require you to submit an application, others are increasing fees and taxes, some are banning short-term rentals in certain neighborhoods, and some are outright banning short-term rentals. Business Insider did a deep dive into 26 North American markets and provided overviews of regulations in each one.
What Should Short-Term Rental Investors Do?
As regulations tighten in various rental markets, here is what real estate investors should do.
Research Local Regulations
Start by thoroughly researching the short-term rental regulations in the markets where you invest and plan to invest. Some good online resources include the Airbnb Host Resource Center and RentResponsily.org. Another good resource is the local government in the area. Visit the official website of the government or municipality for the area where your rental property is (or will be located), and look for a section on short-term rentals, vacation rentals, or transient accommodations. Government websites often provide information on local regulations, permit requirements, and contact information for relevant departments.
Stay Informed
It’s not enough to simply research existing regulations. Short-term rental regulations can change over time, so it’s essential to stay informed about any updates or amendments. Subscribe to local government newsletters or websites, join local real estate investor associations, or use online tools and platforms that track regulatory changes.
Obtain Necessary Licenses and Permits
Identify the specific licenses and permits required for vacation rentals in your area. This may include a business license, short-term rental permit, and other related permits. Then contact your local government or relevant department to obtain application forms and guidelines for the required licenses and permits. Be prepared to pay application fees, permit fees, and any other associated costs. Keep in mind permitting fees are better than permitting penalties. According to the Washington Post, NYC hosts who do not adhere to the new regulations will be fined up to $1,000 for a first-time violation.
Diversify Your Assets
Do not invest in all the same property type or all the same city. Investors with multiple short-term rentals in New York City right now are quite stressed. If you want to invest in more short-term rentals, look for markets that have little to no Airbnb regulations. Mashvisor has a great list as of September 2023 of markets with NO regulations including Kissimmee, Phoenix, and Memphis. Also consider investing in different property types, including long-term rentals or commercial property.
Consult with Legal or Real Estate Professionals
If you have complex questions or concerns about short-term rental regulations, consider consulting with a local attorney or a real estate professional with expertise in the area. A real estate investment consultant can help you stay compliant in your market and mitigate your risk.
Work with MXM Acquisitions & Investments Group Inc. to Grow Your Short-Term Rental Portfolio
At MXM Acquisitions, we have over two decades of experience in helping real estate investors build successful portfolios. Investors ourselves, we have first-hand expertise on:
- Investment Monitoring
- Building Positive Cash Flow
- Risk Mitigation
- Portfolio Diversification
